The United Arab Emirates (UAE), and especially the emirate of Dubai, has a reputation for being a playground for the wealthy, and for not asking too many questions about how wealth is acquired. Despite increased Western pressure to financially squeeze Russia, this appears to be the case, making the UAE an even more appealing offer for wealthy Russians seeking a safe haven for their assets and weakening efforts to convince Russia to withdraw from its invasion of Ukraine.
Abu Dhabi has indicated that it is attempting to strike a balance between the US and its European allies on the one hand, and Russia on the other.
The UAE abstained from a United Nations Security Council resolution condemning Russia’s actions in Ukraine, indicating that the UAE is prioritising good relations with Vladimir Putin’s government over catering to Western interests in Ukraine. The UAE was already home to 40,000 Russian nationals before the outbreak of the war. It has also reportedly guaranteed Russia that it will not impose sanctions against them unless the UN requires it, a situation that is unlikely given Russia’s Security Council veto.
As the financial battle against Russia becomes more intense, Putin’s administration has stated that the sanctions are equal to declaring “war.” Moscow is keeping track of which countries are supporting the West’s financial war against Russia and which are not.
In the end, the UAE and a few other Arab states do not want to destroy bridges with Russia in reaction to the Ukraine conflict. These countries believe that keeping tight ties with Russia will benefit their national interests even after the war is over.
Biden’s decision
The Biden administration will explore what actions it can take if Washington becomes further convinced that the UAE is a facilitator of Moscow’s foreign policy objectives, allowing Russia to avoid sanctions.
To persuade the UAE to sanction people in Putin’s inner circle, the US might issue a warning to banks and other financial institutions in the Gulf country that doing business with them could result in sanctions or penalties. However, given the White House’s desire for Emirati assistance in oil production and other areas, it’s unclear whether the Biden administration would do so at this delicate moment.
The United Arab Emirates may already be paying a price for siding with the West against Russia in Ukraine.
The decision by the Financial Action Task Force (FATF) to add the UAE to a global watch list for money laundering and terrorism financing earlier this month has forced foreign banks to deal with increased compliance costs, potentially jeopardising the UAE’s reputation as a regional financial centre and investment haven. This may impede the country’s capacity to compete with Saudi Arabia for foreign investment and regional trade to some extent.
There’s reason to suspect the designation had something to do with Abu Dhabi’s “neutrality” in the Russia-Ukraine conflict. Following the FATF’s March 4 meeting, when the UAE was added to the list, the Paris-based intergovernmental organisation advised governments that money laundering linked to Russia’s invasion of Ukraine must be avoided.
Emirati state media emphasised the UAE’s commitment to combating money laundering and terrorism funding in reaction to the FATF’s classification.
In the end, Russian oligarchs can count on the UAE to keep their bank accounts open and their valuables in their possession.
Pressure from the US and other Western governments will likely be insufficient to modify the UAE’s approach to sanctioned Russians and the money they have stashed in Dubai and Abu Dhabi. Simply put, the UAE will likely believe it can continue with its current policies despite possible criticism from Western powers if the war continues.
